McGuinty, Harper and the politics of spending cuts

Prime Minister Stephen Harper speaks to Ontario Premier Dalton McGuinty at a transit-funding announcement in Toronto on May 15, 2009.

Jim Ross/Jim Ross/The Canadian Press

ANDREW STEELE

Special to The Globe and Mail

Published January 10, 2012Updated March 26, 2017

According to The Globe and Mail today, Ontario universities and hospitals are "in shock" after the province ended $66-million in research programs.

There are a number of lessons in this for Dalton McGuinty, Stephen Harper, and the hospitals and universities themselves.

First of all, both levels of government are contemplating far more drastic reductions as this very minute. To put the cuts in the paper into scale, $66-million is about 0.4% of the current deficit in Ontario, or about 0.2% of the federal deficit.

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And yet these (relatively) minor cuts were on the cover of The Globe, with breathless outrage from stakeholders about this cataclysm. If they had cut $660-million, there would have been a very similar 450 words by Karen Howlett and James Bradshaw, probably with the same headline graced with one more digit.

When McGuinty and Harper roll out their much larger set of reductions in the coming budgets, they would be wise to wait and announce them all at the same time and on a global scale.

Lesson 1: When cutting, big announcements and small announcements buy you about the same amount of pain.

A different but related point is timing. Part of why it makes sense to make big reductions all at the same time, not piecemeal over a long period of time, to stack the bad news and draw out any good news.

The worst stories – the sponsorship scandal and Watergate come to mind – are long reveals where every day has a new headline. Those impressions add up in voter imaginations, like a poison in the bloodstream.

The best managed communications will stack bad news so that the multiple criticisms blend into a cacophony. There used to be "take out the trash" days, when a government will work to put out multiple bad stories at the same time. This will create multiple competing stories that knock each other off the evening news, and quickly dissolve the toxin of bad news. The federal Tories have been using the practice with some regularity.

Lesson 2: If you are going to do something unpopular, do it all, do it fast, and then move on. Just like taking off a band aid.

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I can't imagine the McGuinty Liberals don't know the first two lessons, considering they were taught to me by McGuinty Liberals. So what is actually going on in Ontario, if the government knows not to do one-off cuts in a relative news vacuum?

The reality is that these reductions were announced back in November as the way the government was paying for new regional development agencies. However, the sectors didn't pick up on the announcement and are only noticing now.

So why the sudden "shock." Clearly, the Ontario Grits are preconditioning the system to accept cuts.

After eight years of relatively strong economic growth, the publicly-funded system is geared to demand greater spending year after year. Hospital CEOs and university presidents haven't had to think about transformational change or budget reductions since the late 1990s. There has been a steady drip of reliable increases year after year, a stable way to grow.

Unfortunately, there is no more money, thanks to the global recession. Executives will need to be ready to adapt to their new circumstances if they are going to ensure they institutions remain vibrant, independent and functioning over the next few years. Better the "shock" comes early, on a relatively minor item, than in a few months when much more fundamental changes are expected.

Lesson 3: If you are going to make major cuts, prepare the broader public sector with early "demonstration" reductions that remove the shock element when major change happens.

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Another different but related point to Lesson 3 is that this was also aimed at the Ontario Public Service.

The civil service in Ontario has spent the last ten years being rewarded for thinking up smart ways to improve services with more money. Under Ernie Eves and then Dalton McGuinty, cuts were relatively sparse and used to fund other, more critical items. Deputy ministers who were smart and thoughtful used their energy to grow new programs or restructure their departments around new priorities. Deputy ministers who championed reducing their own budget were rarely rewarded, either by their colleagues or by a system geared toward stability and ensuring stakeholder institutions were not in "shock."

The rules have changed. Now the province (just like the federal government) needs to demonstrate that the incentives have changed.

What better way to do that then ending programs developed by the Premier personally when he was minister of research and innovation? If those sacred cows can be eliminated, and the minister and deputy minister who championed that reduction supported and tacitly rewarded by the Premier and secretary of cabinet, then the rule of the game have clearly changed.

Lesson 4: If you are switching to making major cuts, signal to the civil service that they need to implement them.

The crucial element of making unpopular decisions is not announcing them or making sure the aggrieved parties notice them. The hard part is maintaining the will to go through with them after the outrage mounts.

By making the planned reductions, then going through with them unwaveringly, the government will demonstrate steadfastness. However, this is of limited utility, as many of the key spending decisions of the next few years – employee compensation, pension reform, transfers to individuals – strike at much more entrenched and militant groups than researchers.

But if the Liberals back down on this minor cut, expect these groups to be unmanageable.

Lesson 5: Once you jump, you can't claw your way back on the diving board.

As Prime Minister Harper and Premier McGuinty contemplate the challenging year ahead, they would be wise to take note of this story and the lessons it provides.

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